Commercial Real Estate Blog

Permitting and construction delays, negotiation hurdles, holidays, tight supply are just some of the reasons why it is crucially important for Tenant’s to engage the services of a broker early on in the process of leasing or purchasing space for their business.

By waiting too long to start the process, a company could be limiting its options: rental rates could be higher and the number of spaces available might be limited. Based on a tenant’s size, we recommend engaging a broker within the following timeframes.

Amongst the decisions that need to be made when leasing office space, the length of the lease term is one of the more important. Some of the things which need to be considered are:

• How important is the location, the image, and the visibility?
• How predictible is the company’s future growth.
• What are the market conditions and will a longer term allow you to take advantage of favorable market conditions?
• Will there be a significant amount of tenant improvements invested in the space?

While lease terms are not standard, they do vary depending on product and market conditions. When the market is soft and a lot of space is available, landlords are more accomodating to shorter terms; they want to do what they can to get their buildings filled, but they often times do not want to commit to long term leases at historically low rates.

Nevertheless, it is important to consider your company’s specific needs as opposed to those of the landlord. If your company has significant money invested in office improvements (law firms, private finance, etc.), lab space (biotech, medical), clean rooms (semiconductor, medical device, etc.), and/or data center space, then a longer term lease will likely be the preferred scenario. It not only allows the company to predict their occupancy but a longer term leases generally increases the amount of tenant improvement dollars a landlord might contribute to the deal.

As a tenant it is important that all these questions be answered so as to try and prevent any costly leasing mistakes.

I’ve received an email letting me know that it would be helpful if a real estate glossary was provided. While I’ll try to make my posts simple to read and easy to understand I understand and agree with the need for a glossary.

As a result, I’ve created a glossary containining terms commonly used and referenced in commercial real estate articles and discussions. I hope that it is complete enough and encourage you to contact me if there  are any terms that you feel need to be added. I will also be putting a link to the glossary in the right toolbar under Leasing Tools to help you find it from the homepage.

Finally, I’ve created a PDF version of the Commercial Real Estate Glossary for those of you that are interested in having a printable copy handy.

If any of you have any other comments and suggestions, I’m always open to hearing from you.

With private equity funds flush with cash they are ready to invest, and the expectation that rental rates in Silicon Valley will continue their rapid rise, commercial properties are trading hands at record prices.

Following a sale, many tenants are caught of guard when they receive a notice from their landlord notifying them that the operating expenes (sometimes referred to as triple nets, or NNN expenses) for their building will be increasing dramatically.

To put this in perspective I’ll provide an example. A tenant occupies 50,000 SF building where they pay $1.00, plus NNN expenses (NNN = maintenance, property insurance, and real estate taxes). Let’s assume the property was last sold 10 years ago and the property is currently assessed for $5M. This would mean the annual taxes are about $57,500, or about $.10 per SF, per month.

In today’s market, this building might be worth twice the currently assessed value, and possibly more. Let’s say this building is sold for $200 PSF, triggering a reassessment which doubles taxes to $.20 per SF, per month. In addition, insurance premiums see an increase of $.02 per SF, per month over the previous amount. Now what you have is a 10% increase in a tenant’s occupancy costs with no perceived additional value being provided to the tenant.

In today’s market, this is not an uncommon scenario. It is recommended that tenant’s retain a good broker to help shield them from some of these expense increases, or at the very least help them understand what impact a potential sale could mean to their bottom line. 

We assist clients both large and small. Large companies tend to have in-house departments which help plan, coordinate, and manage facility moves. Small to mid size companies either don’t have the need or the budget to support such groups full-time. As a result we often get questions from smaller tenants about some of the things which they need to do before, during, and after moving.

To help, we’ve put together a checklist of items that most companies need to do during the moving process. The list certainly doesn’t cover everything from A-Z, but it does cover some of the more common tasks which need to be completed.

As a company grows in size, relocation becomes a very large and complex undertaking, requiring input and coordination of construction, IT, finance, furniture vendors, engineering, and other teams and personnel. If you feel you are ill-equipped to successfuly execute the process, it might be wise to consider bringing in a professional. Outside relocation consultants can help manage the move, avoid common pitfalls, and ultimately make the move a success. If you are interested in move management, contact us.

Office Move Checklist.pdf